Law Society to set cap on amount for referral fees

Convocation approved a policy to cap and further regulate the fees a lawyer or paralegal may charge for referring a client to another licensee.

A cap on referral fees was approved in principle at Convocation’s February 23, 2017 meeting. The amount of the cap, rule amendments to implement the policy, and related proposals for additional requirements to increase transparency in marketing and to ensure genuine consent in referral fee arrangements, will be considered by Convocation in the coming months.

The policy change was recommended by the Advertising and Fee Arrangements Issues Working Group in response to growing concerns that current referral fee systems are not transparent or beneficial to the client.

In the course of its research, the Working Group found:

The client is often not aware they are being referred, or that there is a fee involved in the referral;

Referral fees that were once in the range of 10–15 per cent are now in the range of 25–30 per cent;

Misleading advertising is fueling the lack of transparency in referral fees.

“With these changes, the Law Society is establishing new and stronger measures to protect the public. Capping referral fees and taking steps to make certain the client is fully aware of their options will ensure that it is the client who benefits from the referral,” says Law Society Treasurer Paul B. Schabas.

The Working Group will return to Convocation at a later date with recommendations for:

The amount at which referral fees will be capped;

Additional transparency measures such as requirements for:

Lawyers and paralegals to be clear in advertising if they or their firm do not intend to perform the legal services;

A standard referral agreement to be signed by the client, referring licensee and the licensee accepting the referral;

The client be provided with more than one choice of lawyer or paralegal in the referral.

“We will continue to monitor lawyer and paralegal activity in this area, and our enforcement, to ensure Ontarians are well-served and the public interest is paramount,” continued Schabas.

The Advertising and Fee Arrangements Working Group

The Law Society established the Advertising and Fee Arrangements Issues Working Group in February 2016 out of concern that certain advertising practices and fee arrangements were misleading and detrimental to the public. The Working Group reports to the Professional Regulation Committee.

Over the past year the Working Group researched the issues, held a series of focus groups with practitioners and stakeholders and consulted with the public and the professions.

In addition to developing recommendations to implement the referral fee cap, the Working Group will continue to consider contingency fee arrangements, and advertising and fees in real estate.